Understanding the FAFSA
By Lucy Lazarony • Bankrate.com

If you think your student's college financial aid paperwork reads like a Greek 101 exam, you are not alone. Sorting through the Free Application for Federal Student Aid (FAFSA) form can be cumbersome, at best and an incomprehensible nightmare at worst.

If you haven't filed a FAFSA yet -- get on it. This form must be completed if you want your son or daughter to be eligible for federal and state aid. A lot of aid is distributed on a first-come, first-serve basis, so the sooner you file, the better.

After filing you will receive a Student Aid Report (SAR). Your SAR is also available online at the FAFSA Web site.

This report summarizes the information submitted on the FAFSA and lists your expected family contribution (EFC), which is the amount of money the government expects your family to pay in college education costs. The EFC is used to determine your student's eligibility for federal student aid.

Be sure to be sitting down when you open that envelope.

"It's kind of a shock to their system," says Ronald Shunk, director of financial aid at Gettysburg College in Gettysburg, Pa.

Shunk, who has answered parents' questions on USA Today's Financial Aid Hotline for 10 years, quickly adds, "But one way or another it seems to work out."

Check your numbers
The first thing to do is make sure the information on the SAR is complete and correct. In case of an error, resubmit the form to the central processor as soon as possible. Corrections will go through in a couple of weeks, and each college that your student applied to will have access to the updated information.

Folks who estimated their earnings may need to re-submit the form if their guesses were too far off. A quick glance at your W-2 form should tell you how close your estimate came. Most folks shouldn't have a problem.

"For most people these days their last pay stub shows them how much they've earned, so they're not going to be far off on an estimate," Shunk says.

Colleges and universities start sending out admission acceptance letters in March and financial aid award notices come close behind. Expect a financial aid award letter to arrive within two weeks of an acceptance letter. Many schools send out acceptance and aid notifications on the same day.

In a financial aid package a college or university will try to make up the difference between the cost of attending their school and a family's expected contribution as spelled out in a SAR report. Some succeed more than others. Three schools with similar costs may offer very different financial aid packages.

Much depends on a student's academic credentials, a family's financial need and how much aid is available from a school. Private schools tend to have deeper pockets than state schools.Many middle class families may find themselves in a tough spot. They have too much money to qualify for need-based aid, but too little money to cover college costs on their own. So parents or students -- or both -- take out loans.

"That's the group that ends up borrowing the most," says Carolyn Shanley, senior writer and public relations manager for Nellie Mae, a maker of education loans. "More and more people are in that situation." Indeed, the College Board estimated 58 percent of the $74 billion in financial aid distributed in the 2001-2002 school year was for loans.

Don't dip into retirement savings
Parents who feel barreled over by their expected family contribution and the prospect of some heavy education loans for themselves or their child may be tempted to dip into their retirement savings. Experts advise against this.

"You can't borrow for retirement. And your child can borrow for school and have a long time to pay it back," Shanley says. "If they're still saving for retirement and still have a long way to go, they need to make that their No. 1 priority."

A bit of a waiting game goes on during this whole process. First you wait a few weeks for that SAR to arrive. Then you wait a few more weeks for those acceptance letters and the financial aid awards to trickle in.

All candidates should receive an admissions notification by around April 1 and financial aid packages by mid-April. Most schools give applicants until May 1 to select a school. Students should make use of all this down time to seek out and apply for scholarships.

"There are deadlines for awards every single month," says Mark Kantrowitz, founder of FinAid, a Web-based guide to financial aid.

Look for scholarships
Check out individual college Web sites, and search for scholarship sources on sites such as FastWeb and the College Board. Avoid sites that charge you to search for scholarships. Don't overlook local sources of scholarships. Community-based awards may be smaller, but they're also easier to win. You can learn about local competitions at the public library and at the guidance office at your local high school.

As gifted and talented as your teen may be, not every student gets that much-sought-after free ride. Experts point out that while SAR reports may make parents sweat a bit, it's the financial aid notices that throw some families into an all-out panic.

"The more climactic point is when financial aid packages start arriving," says Shawn Lindstrom, director of financial aid and scholarship services at eStudentLoan.com. "That's when the sticker shock sets in and they start exploring other avenues. They start calling the school and say, 'How do you expect me to pay for this?'"

First off, you do have a little bit of leverage if your teen has been accepted at a number of schools. You may be able to negotiate a better aid package by mentioning to School A all that School B is willing to do for you.

"Most aid packages can be negotiated and appealed if you just take the effort," says Gary Goldberg, president of College, Financial & Tax Strategies in St. Louis.

It's worth a shot. A calculator for comparing award letters can be found on the Nellie Mae site. While cost is certainly not the only factor that families look at when deciding on colleges, it plays a key role. It may make the difference when a student is choosing between two schools.

"For a few hundred dollars they're not going to turn down one school over another," Shunk says. "But for a few thousand a year they may."

-- Updated: Nov. 20, 2002